How Much Is in Retirement Accounts (By Generation!) + Money Q&A

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2:50What's up, everybody? Welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of MasterMoney.co. And today on the Personal Finance Podcast, we're going to be talking about the average retirement savings by generation. If you guys have any questions, make sure you join the MasterMoney newsletter by going to MasterMoney.co slash newsletter. letter. And don't forget to follow us on Spotify, Apple Podcasts, YouTube, or whatever podcast player you love listening to this podcast on. And if you want to help out the show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast player.

3:26Now, today, we're going to be diving into the average retirement savings by generation. And then we're going to be answering some of your questions and doing a money Q &A in the second half of the show. And so I'm really excited to dive into this because we are going to be looking at data from Fidelity that shows the average retirement savings by generation. And we're going to start this one off with Gen Z. So Gen Z are folks who were born from 1997 to 2012. And so we are looking at the average retirement balance for folks who are in Gen Z. And really, if you are in Gen Z, this is the peak time for you to start saving for retirement.

4:05Why? Because these dollars are so incredibly valuable. And as you grow your wealth over time, you're going to see these seeds that you planted right now, the seeds that you started off with are going to fund your retirement for the rest of your life. Now, one thing to note here is that most people in 2025 who are in Gen Z, their ages range from age 13 all the way up to 28. Now, the oldest members of this generation are in their late 20s and many are still in school. And so we want to make sure that we note that as we start this off. Now, the average balance in the 401k for Gen Z, who have a 401k, is$13 ,500.

4:43And so the employee contributions in these accounts from this Fidelity data are about 7.2%. And the employer contributions are 3.7%. Now, if you're watching on YouTube or on Spotify, we're going to put this chart on the screen for you so that you can see this as we go through this. Now, 18.2 % are contributing to a Roth 401k, which is an uptick from a lot of others out there. And the average balance in their IRA is about$6 ,672. Now, why does this matter? Why does it matter for Gen Z? Well, Gen Z is starting earlier than any other previous generation, which is absolutely fantastic. They are actually starting to invest earlier.

5:24Now, I think this is a testament to the financial education that is out there for a lot of people. There are folks on TikTok talking about, hey, make sure you're saving for your retirement. There are folks on Instagram, YouTube talking through this. And I think financial education is rising across the board. Now, it's still not even close to where it needs to be, but we are at least seeing people starting saving for retirement earlier than they were before. And I think that is really, really cool. Number two, starting in your early 20s gives you this massive compounding advantage. So anybody who is Gen Z, who is listening to this right now, I want you to understand as we go through this.

5:59You have an opportunity to absolutely change your financial life if you start investing now. Now is the time to get your finances together because once you get into your 30s and 40s, you are going to regret not planting the seeds right now. Someone who starts in their 20s will massively outperform someone who starts in their 30s and who works twice as hard as someone in their 20s. And so once you get the ball rolling, you're gonna realize that all you gotta do is just start packing up snow. And as you start to pack in snow, once you get to your 30s, you're going to be able to roll that snow downhill and compound interest is going to start doing the work for you.

6:36But now is the time. Now, you may have come from a background that doesn't understand how to invest. You may have come from a background where every single person in your family is not well off. And you're saying to yourself, well, you know, I've never seen anybody in my family actually do well. And so how would I do well? How you would do well is you could change your family tree right now. You could absolutely turn your entire family tree around just by planting the seeds. Even if it's$100 a month, even if it's$200,$300,$400 a month, whatever extra gap that you have available, that is what I want you to start with.

7:06Now, most people, I want you to get to the point in time where you're at least investing 20 % of your income. That's where we really want you to get to at a bare minimum. But when you are just getting started, at least getting the ball rolling with$50,$100, $150,$200, it is going to make a massive difference. Now we have something called the Wealth Builders Matrix. If you go to mastermoney.co slash resources, it is going to show you how much every single dollar you invest is worth based on how old you are by the time you turn age 65. It is really, really eye-opening. So someone in their early 20s and Gen Z, every single dollar they invest is going to be worth about$100.

7:42Sometimes it's$110, depending on how old you are. For folks who are in their later 20s, every single dollar you invest is going to be worth a little less, but it is still massively impactful. It's going to make you rethink a lot of your spending decisions when you look at the wealth builders matrix, because you can see what every single dollar is worth. Now, if Gen Z keeps up with this pace with continued contributions, the cool thing about this is, is they may be the wealthiest retirement generation yet if they keep the ball rolling, because they are getting started earlier than everybody else.

8:11And so because of that, we're going to see a huge, huge difference here in Gen Z from some of these other generations and what the total outcome is, because folks who start early, that is where the biggest impact is going to be. Now let's get into the millennials. The millennials are a generation that early on did not save and invest as much as they should. And it slowly has turned around as time has gone on. The millennials, I am a millennial. That is my generation, the generation that I was born into. And these are folks born between 1981 to 1996. And so in 2025, most millennials are between the ages of 29 to 44.

8:47And so this is something where the oldest millennials are entering crunch time for savings, and many are dealing with these competing priorities. Now, here's the thing with millennials is most of you are in this point in time where your earnings power is starting to increase, but you're in the middle where your time is becoming restricted because you have families and or you're just focusing on your career. And so a lot of your time is being reduced based on your priorities. And so because of this, we need to set up automations and we need to set up financial systems that are going to allow us to retire by the time we hit retirement age.

9:20The time to start is right now. If you're a millennial, then you need to make sure that you are investing for retirement. You guys grew up in an era where we needed better financial education. And so now we have it. Now we have that point in time where I want you to start to get these dollars working. So the average balance for millennials right now That was$67 ,300 in a 401k. Now the employee contributions on average is only 8.7 % and the average employer contribution is 4.6%. Now this is in the traditional 401k. Now how many are contributing to a Roth 401k? 18.3 % of millennials are contributing to the Roth 401k.

10:00Now the Roth 401k, for those who don't know, is a very powerful account that allows you to get in 2025,$23 ,500 into that Roth 401k. So you put money in, it grows tax-free and you can pull the money out tax-free. So you pay those taxes upfront from your paycheck, but then it grows tax-free and you can pull that money out tax-free. It's a really powerful account. And so also the average IRA balance for folks who are millennials is about$25 ,109. And so why does this matter for millennials? And why do we need to understand where we stand as millennials? Because most millennials, when you're between the age of 30 and 45, you are in your wealth building prime.

10:39This is where you need to lay the foundation in the building blocks in order to ensure that you are going to retire comfortably. This is where your retirement plan really starts to accelerate. And so if you don't get your act together right now, then you are going to start to fall behind and you're going to feel behind. You will regret your decision. I'm going to tell you right now, you're going to regret it if you don't get the ball rolling. So I need each and every single one of you to strap up and let's get invested. Now, this is not something that is optional to go out and start investing.

11:09It is required to go out and start investing because inflation is going to eat away at your buying power every single year if you don't. Now, that's not some sort of theory. That is fact. Every year, inflation will eat away at your buying power. You can look at the difference in costs from 2019 to now, and you can see a massive, massive difference. And the reason for that is because inflation is going to eat away every single year at your buying power if you do not work on this stuff. So really, really important to make sure that you are investing your dollars because you're in your wealth building prime.

11:41Now is the time. Number two is if you are only investing 10 % of your income, maybe it's 15 % of your income, it is time to start ramping up contributions. You need to make sure that you are putting enough into these retirement accounts. So getting to 20, 25, 30 % of your income is the range we want you in. And so if you're not doing that currently, then you're gonna be working a much longer period of time. Now, why does this matter? Why does it matter to make sure that you increase your contributions? One is because the math is very simple. Your retirement contributions or the amount of money that you put towards investments, it doesn't have to be in retirement accounts.

12:14It could be in a brokerage account. Maybe you invest in real estate, but your savings rate, the amount of money that you are putting away towards investments has a direct impact on how long you will have to work. And so if you don't wanna work anymore or you wanna pursue financial freedom, and that is your ultimate goal, that is what you really want to get to, then we need to make sure that we are increasing our retirement contributions. So let's try to do this with the 1 % rule, meaning every single time that you look at your savings rate and you say, well, it's not enough yet. I'm only saving 10 % of my income.

12:43Well, let's try to increase it to 11 % next month, then 12 % the next month. And so just by increasing the dial slowly over the next couple of months, that's going to allow you to really reach those retirement goals over time. Not just ripping off the band-aid right away, you're gradually increasing it. This is a great place to be in. And really, once you get to 20%, then you can decide, am I going to continue or am I going to stop here? Now, you also, as a millennial, are going to have competing priorities. A number of different things are happening. A lot of millennials have student loans and these student loans are eating away at their ability to be able to go out and invest for their future.

13:20A lot of millennials are dealing with childcare. care. Now, this is one that's not talked about enough. If you have young kids and you have them in child care, you know this is one of the biggest costs or the biggest line items in your budget. Each child that's in child care is typically anywhere from$800 to, depending on where you live, it could be all the way up to$2 ,000 per month just to have your child in child care. If you have a nanny, it's probably even higher than that. And so because of this, this is a huge, huge line item for a lot of millennials. Because if you have one to two kids in child care, where you're looking at thousands of dollars every single month.

13:53And so this is another big thing. Then housing costs are rising. And if you didn't buy a house in 2020, then you are looking at a situation where you may have higher housing costs than other folks. And so you have these competing priorities. What we need to do is learn how to juggle these competing priorities and then figure out how to increase our income over time so that we can achieve our financial goals. We talk a lot about how to increase your income here. And so if you haven't heard those episodes, make sure you're subscribed to this podcast because that is our big, big goal is to make sure that we help you increase your income.

14:23All right, next up is Gen X. So Gen X was born between 1965 to 1980. And so right now in 2025, Gen X is between age 45 to age 60. So Gen Xers are turning 60 this year and getting ready for retirement. This is crunch time, big time for people who are Gen X. And really, this is the time to get your stuff together. And so overall, if you are in Gen X, we are starting to really plan and ramp up for retirement right now. So the average 401k balance for someone who is in Generation X is going to be$192 ,300. And the average employee contribution is 10.2 % to their 401k. And the average employer contribution is 5%.

15:07So that means they are putting 15 % of their income into their 401k. That is a great start for a lot of folks. But their Roth 401k contributions are actually lower than Gen Z and the millennial generation at 14.5%, which I think is very, very interesting. Now, the Roth 401k is a newer product. And so the question then comes up, well, is that a reason for why this is happening? Not really sure. And so then the question comes up, is that the reason why this is happening? We'll have to dig deeper. And the average IRA balance is higher at$103 ,952. So Gen X is in catch-up mode. Now, one thing that Gen X can do is they can take advantage of catch-up contributions, meaning after the age of 50, you can contribute more to your 401k and you can contribute more to your Roth and your traditional IRA.

15:53And so they can take advantage of that after the age of 50. Now, if you are in catch-up mode, you're in the final decade before retirement, it is really imperative that you take as many of those extra dollars as you possibly can and put them towards wealth building activities. I mean, your investments, your emergency fund, making sure you pay off any high interest debt. All those big things are very important. Now, this generation often has peak responsibilities. So they have a couple of different things to juggle. One, a lot of them are going to have kids that are either going to high school or maybe they're teenagers.

16:22And so they're having to deal with those priorities. In addition, they also have aging parents. And having aging parents becomes a responsibility of a lot of folks now. And so you have to make sure that you're budgeting and planning out for that. In addition, they have mortgages and other things that they're juggling. And so their expenses are pretty high. And really, overall, it's a tough situation to be in and making sure you juggle all those things. But they have to figure out what to do. But as they approach retirement age, they have to make sure that they are doing the right things and taking the right steps in order to be able to retire.

16:51Now, this is a very powerful place to be. And for most people out there, if you saved early and often, then you know you're probably feeling good about your situation. If you did not save early and often, now is the time to catch up. It is never, ever too late. So anybody out there who is in Gen X who is just getting started, I want you to know right now, it is never too late. We have multiple episodes talking about why it's never too late. And so I highly encourage you to check out those episodes if you have not already. But I want you to know, you got to start now. Now is the time to start. Because if you don't start now, you're going to be living in retirement, relying on social security.

17:23And that is not a good retirement to live on. That is not financial peace. That is not a place that is going to give you financial peace. Instead, I want you to get started right now. And then the last... We've got a lot planned this summer. Trips with kids, time outside, long weekends, and just more moments together as a family. And honestly, the older I get, the more I realize how important it is to protect it all. The good news is getting life insurance doesn't have to be this huge, stressful project anymore. That's why I like PolicyGenius. PolicyGenius isn't an insurance company. They're an online marketplace that helps you compare life insurance quotes from top insurers side by side for free.

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21:10There's no place like Chrome. Check responses set up required compatibility and availability varies 18 plus. This generation we're going to go through is the baby boomer generation. Now, the baby boomer generation is a generation that was born from 1946 to 1964. And a lot of them in 2025 are between the ages of 61 to 79. Now, most of them are well into their retirement or have started to draw down on their savings. So some of the younger baby boomers may have not retired yet if they are still working on retirement. And then some of the older ones have been retired for a good amount of time. Now, the average balance in their 401k is$249 ,300.

21:52And the employee contributions are 11.9%. And the employer contributions are right around 5%. And the amount that are contributing to a Roth 401k is even lower at 12.2%. Now, the average balance in an IRA for the baby boomer generation is$257 ,000. Now, even with strong retirement savings, a lot of the baby boomer generation is still relying on Social Security. They're heavily relying on Social Security. I want everybody in the younger generations watching this episode right now to do this and to think through this. I don't want you relying heavily on Social Security. Why? We don't know how much is going to be there.

22:27And so this is relying on something that you cannot control. Someone can take this away from you whenever they want to. Now, is that going to happen? I don't think it's very likely for Social Security to go away. They've been saying it's going to go away for decades and decades and decades. But that's just my opinion. What if it actually did? What would you do in that situation? If you're relying on Social Security, you are in trouble. And so I want you to make sure that instead, we are deciding to take control of our retirement ourselves. And so we are going to take control of this by investing in our future and putting more money into our retirement accounts.

22:58Now, longevity risk is real for a lot of folks out there. And these accounts must stretch for decades, especially with the baby boomer generation. And so they need to make sure that they are preserving their retirement accounts. And so again, this is a great lesson for folks who are in the younger generations to start early, start making sure that you are automating your contributions so that you can get ahead. So again, on the screen, we're going to put a summary of everything we just talked about here. The average 401k balance for the baby boomer generation is$249 ,300. For Gen X, it's$192 ,000.